The Brief for December 7, 2020

Happy day!

Altcoins are still keeping pace with bitcoin. And, despite a week of overall lower prices, bitcoin’s price remains (slightly) higher than it was when I sent my last brief. Which way will we go from here?

Allianz chief Mohamed El-Erian said he sold bitcoin, while MicroStrategy chief Michael Saylor said he bought more bitcoin. Who made the better choice?

Last week, YouTube and Twitter said nobody’s selling. All the sell orders were getting cleared out. All the bitcoin was moving off of exchanges. Institutions were buying directly from miners. Yet, the price has gone down since then. Why?

Lots of questions, few answers. For my thoughts, watch this video I sent subscribers a few days ago when bitcoin was near its all-time high.

Lots of news but only two articles for this update.

• S&P Dow Jones Indices to launch cryptocurrency indexes in 2021

  • Bottom line: one of the U.S.’s biggest index providers will track data for cryptocurrencies.

  • My take: huge but nobody else seems to notice. Wall Street uses services like these to peg prices for investment products like ETFs and index funds. Until now, only small firms have provided this type of service for crypto. While they’re quality companies with strong leaders, they mostly serve a niche market on a relatively small scale. S&P DJI is bigger and presumably better connected to the broader network of traditional financial, legal, and regulatory professionals.

  • Why we care: if you want safe, easy, and convenient ways for Aunt Sally and Uncle Morton to put a few bucks into the crypto market, you need Wall Street to create these financial products. Before Wall Street can do that, it needs indices it knows and trusts. Otherwise, it’s hard to a) put together a compelling, reliable product and b) get the U.S. government’s approval. (This deficiency was one of several reasons bitcoin ETFs have failed in the past.)

• New Fund Exposes Canada's Traditional Investors to Ethereum

  • Bottom line: Canada approved 3iQ’s Ether Fund, a new way for people to speculate on the value of Ethereum without buying or HODLing it.

  • My take: it’s nice to see traditional investors will have a competitor to Grayscale’s Ethereum fund. What altcoin comes next: XRP? LTC?

  • Why we care: as altcoins get larger, more people buy and sell them, and Wall Street gets savvier about how to get approval for new investment products, you will see more of these funds for more types of crypto. Aunt Sally and Uncle Morton won’t open a Coinbase account—too complicated, too risky, not worth learning. But, if prices keep going up for long enough, they might tell their financial advisor to drop a few bucks into “that bitcurrency fund our kids keep talking about.”

Relax and enjoy the ride!